City to reveal exit plan from bankruptcy

STOCKTON - The city struck a new deal Tuesday with the owner of the Stockton Thunder hockey team as bankruptcy proceedings quickly approach a milestone.

Scott Smith

STOCKTON - The city struck a new deal Tuesday with the owner of the Stockton Thunder hockey team as bankruptcy proceedings quickly approach a milestone.

By Friday, Stockton expects to publish on the city's website an early draft of its bankruptcy plan to adjust its debts, including the Thunder agreement, an attorney for the city told a judge in court Tuesday.

Marc Levinson, who is leading the city's Chapter 9 case, said that this early version of the plan will likely undergo many changes as the back-and-forth negotiations with creditors continue to play out.

The City Council will take public input and vote on the plan at an Oct. 3 meeting, which also could alter the plan and an accompanying disclosure statement.

"We're moving the ball forward in a very good way," Levinson told the judge. "We're optimistic that an agreement, or agreements, will be reached."

Until Detroit filed for Chapter 9 protection with billions of dollars in liabilities, Stockton had been the nation's largest city to seek bankruptcy protection. San Bernardino filed for bankruptcy shortly after Stockton.

Stockton could be ready to ask the judge to confirm its plan by January. If creditors choose to take aim at the California Public Employees' Retirement System, Klein said the process could take longer.

"It's very standard in reorganization cases - particularly in complicated reorganization cases - that the proposal of a plan start an iterative process, in which there are multiple adjustments as the parties work their way toward confirmation," Klein said in Tuesday's hearing.

A key part to the draft plan expected to go public this week is passage of Measure A, the city's 3/4-cent sales tax measure that is supposed to be used for Stockton's crime fight and bankruptcy debts.

If voters don't pass it Nov. 5 with 50 percent plus one, Levinson said the city will be forced to revise its bankruptcy exit strategy. The city estimates that even after bankruptcy it will have an $11 million annual budget deficit, requiring more cuts to basic city services absent the new tax dollars.

Bankruptcy negotiations continue to progress. Under the Thunder's new deal, Stockton pays about $200,000 less each year to subsidize the operations at the city-owned Stockton Arena, which the team calls home.

The Thunder have played in Stockton Arena since 2005, when it opened, drawing record attendance and a huge fan base, the city said. The city this year subsidized the arena operations by $1.3 million through SMG, the city's entertainment agent.

The new terms will allow the city to generate more money and allow the Thunder to recoup some of the revenue from suite sales and merchandise sales at games, the city said in a prepared statement. Details of the settlement were not made public.

The city's negotiations have been rockier with owners of the Stockton Ports, the minor league baseball team that plays in the nearby ballpark. The city has issued a subpoena for the Ports' business records.

City Manager Bob Deis complimented Thunder owner Brad Rowbotham of Alberta, Canada, who bought the Thunder in 2010, for being a good partner with the city.

Deis said Rowbotham recognized that the original lease he assumed from the team's prior owner was symptomatic of the agreements the city made in the early 2000s that led Stockton to its fiscal crisis.

"It hasn't been easy," Deis said in a written statement. "He made a significant investment in the team and in the community. We appreciate what he has done for the community of Stockton."